Monday, February 18, 2008

Saskatchewan Party: Energy industry contributed over $445,000 to party from 2003-06, majority of donors in Alberta; Premier Wall cozying up to CAPP

Saskatchewan Premier Brad Wall & CAPP President Pierre Alvarez

The energy industry has been good to the Saskatchewan Party. In the four-year period from 2003-2006 the party received over $445,000 in contributions from 114 corporations and organizations. Approximately 76 of those are located in Alberta.

The figures were drawn from the Saskatchewan Party’s annual registered fiscal period return filed with Elections Saskatchewan and include only those corporations that contributed in excess of $250.00.

“A lot of these companies are run by guys who have left the province,” Downs said.

“They are interested in having a government interested in growing the economy.”

Downs made the comments when he was chief of staff to former party leader Elwin Hermanson. [Sask. Party looks to Alberta (Leader-Post, Oct. 17, 2003)]

On June 7, 2004, five B.C. cabinet ministers, along with five mayors and 40 companies from the province’s oil and gas-rich northeast region were in Calgary to drum up business for the B.C. oilpatch service sector with a trade show, luncheon and a series of private meetings.

In B.C. woos Calgary oilpatch: Area hoping to lure business to energy- rich northeast (Calgary Herald, June 7, 2004) Geoffrey Scotton reported that B.C. was working closely with major energy industry lobby groups, including the Canadian Association of Petroleum Producers (CAPP), the Canadian Association of Oilwell Drilling Contractors (CAODC), the Canadian Association of Geophysical Contractors (CAGC), the Small Explorers and Producers Association of Canada (SEPAC) and the Petroleum Services Association of Canada (PSAC).

Greg Stringham, vice-president of markets and regulatory affairs at CAPP said the B.C. government has been doing all the right things to cultivate their energy sector through reduced or eliminated taxes, increasing road spending and other measures.

“They have listened very carefully to what we have asked for and we’re satisfied almost everything we’ve said needs to be done to become competitive, they’ve moved ahead on,” said Stringham.

Saskatchewan residents would do well to remember these influential lobby groups because they will surely play an integral part in Premier Brad Wall’s plans for the sector just as they have done in B.C. and Alberta.

On Sept. 23-24, 2004, just two days after releasing his economic paper The Promise of Saskatchewan in Saskatoon, new party leader Brad Wall was in Calgary making an economic sales pitch to energy companies, the industry lobby group CAPP and Saskatchewan expatriates.

In Wall defends Alberta trip as economic opportunity (Leader-Post, Sept. 25, 2004) Wall said there is a great deal of interest in Saskatchewan among Calgary’s oil and gas companies because of both the large number of ex-Saskatchewan residents who work in the sector and the companies’ high level of activity in the province.

The NDP government has made strides in restructuring the royalty structure to encourage investment in the province, said Wall, but the energy sector still has a list of what it believes are barriers to growth in Saskatchewan. Those include the province’s capital tax and body of regulations.

In his economic paper Wall identified oil, gas and energy production as his number one target sector for growth.

“Saskatchewan accounts for almost 20% of oil production in Canada, putting us second behind only Alberta,” Wall said.

“While the government has made progress in terms of royalty rate restructuring to stimulate activity in the oil and gas sector, other irritants such as red tape, permitting processes, the PST, the corporate tax, income tax and the capital tax are deterrents to further investment.”

Fifth on Wall’s list of targets is mining which he says “is the third largest industry in the province, following oil and natural gas, and agriculture.”

“As in other industries, we need to address barriers to further economic growth. These barriers include the resource surcharge, corporate income taxes and the capital tax. We need to make clear that the role of government is not only to regulate, but to assist companies in navigating the maze of government.”

In the same document Wall unveiled the new economic development agency called EnterpriseSaskatchewan, a scheme that will replace the line department economic development function of government and be mandated to “develop a systematic and ongoing process to identify and remove barriers to growth in each of our key economic sectors.”

At the Feb. 2005, Saskatchewan Party annual convention in Regina, delegates endorsed Wall’s plan “as the foundation for the economic development plan of a Saskatchewan Party government.”

Delegates also resolved that “a Saskatchewan Party government will set the goal of making Saskatchewan the energy heart of North America within ten years by assessing the potential for further development of power generation from wind, clean coal, natural gas, nuclear, biomass, coal bed methane, ethanol, solar, oil sands, co-generation, hydrogen fuel cell technology and any other power source that may be viable in Saskatchewan for provincial consumption and/or export.”

(The Saskatchewan Party government introduced legislation on Dec. 17, 2007, to establish EnterpriseSaskatchewan. The credibility of the agency has been fatally undermined since Wall has already pre-determined what some of the key barriers are in the energy and mining sector.)

Speaking at the annual Saskatoon leader’s dinner on March 8, 2007, Wall said Saskatchewan should be using its massive energy resources to assert its place in Canada.

“We need to be at the table as perhaps the most resource-rich member of Confederation when B.C. and Alberta are discussing reducing barriers to trade and investment,” Wall said, referring to the Trade, Investment and Labour Mobility Agreement signed by the two provinces.

“Imagine the power of the new West if it included Canada’s second- largest producer of oil, third-largest natural gas supplier (and) the world’s leader in uranium and potash.” [NDP’s good ideas come from Sask. Party, Wall says (StarPhoenix, Mar 9, 2007)]

At the time Wall’s support for TILMA was absolute and unconditional. He complained bitterly and chastised the NDP government at every turn for not being part of the closed-door discussions with BC-Alberta and for not signing the agreement in April 2006, which occurred without public or legislative debate.

It should be noted that the oil and gas industry support TILMA.

CAPP and several of its member companies participated in the B.C. government’s Gas Exploration and Production Labour Needs Survey in June 2006. Among the 18 companies sent a survey were EnCana Corporation, Nexen Inc., Talisman Energy Inc., Suncor Energy Inc., Devon Canada Corporation, Anadarko Canada Corporation andHusky Energy Inc. All have contributed to the Saskatchewan Party.

The resulting report, Labour Market Needs in British Columbia’s Oil and Gas Industry (Apr. 19, 2007), was jointly commissioned by the Ministry of Energy, Mines and Petroleum Resources and BC Innovation Council, with advice and input by the Petroleum Human Resources Council of Canada and the Ministry of Economic Development. The analysis outlines skill shortfalls and recommends actions to ensure an adequate labour supply, sustaining the economic momentum produced by oil and gas development in British Columbia.

The study drew upon work that was done by the B.C. Oil and Gas Education and Training Consortium which include senior-level representatives from a number of groups including the Canadian Association of Oilwell Drilling Contractors, Canadian Association of Petroleum Producers, Canadian Energy Pipeline Association, Petroleum Services Association of Canada and the Small Explorers and Producers Association of Canada. (All these organizations were sent EnterpriseSaskatchewan board nominee packages.)

The final report found moderate support for harmonization of regulations and standards, where possible, across jurisdictions and Ministries, oil and gas industry-related policies and programs.

“This issue came up more in the interviews than the industry survey, particularly in the context of labour standards and occupational standards and mobility. Most interviewees lauded the TILMA agreement,” the report notes.

On March 15, 2007, Wall spoke at a $300 a plate Saskatchewan Party fundraising dinner in Calgary, where some 450 people attended. Compared to leader’s dinners in Calgary in previous years, this was the biggest one ever.

In Wall rakes in support at Alta. dinner: Sask. Party fundraiser attracts large crowd (StarPhoenix, Mar 16, 2007) the party leader made no apologies for raising funds in Alberta.

“Raising money for any political party outside of the province is reasonable because, of course, Saskatchewan is part of a country, and Saskatchewan will want to attract the interest of people outside the province to move here. That’s what we want to see. We also want to see investment dollars here, and so I think there’s an interest in the part of Saskatchewan people in the politics and places outside our province and vice versa,” Wall said.

Alberta Progressive Conservative MLA Dave Rodney urged people attending his own Calgary fundraising breakfast -- where Premier Ed Stelmach was the speaker -- to support the Saskatchewan Party and attend Wall’s event.

Wall said there are no links between Alberta’s Tories and the Saskatchewan Party. He said he hadn’t heard about Rodney’s comments, but he wasn’t surprised. Rodney is originally from Yorkton and spoke at the recent Saskatchewan Party convention in Regina, he said.

The Calgary Lougheed MLA said he and other Albertans support the Saskatchewan Party because it’s best placed to develop Saskatchewan’s potential.

“People in Alberta are conservative fiscally and progressive in other ways, and they see that’s what the Saskatchewan Party is all about,” said Rodney, who moved to Alberta in 1988.

On May 9, 2007, the Saskatchewan Party fundraising leader’s dinner in Edmonton attracted about 300 people.

“It was very positive. This was only the second one we’ve ever done here, whereas we’ve been in Calgary basically every year since the inception of the party (in 1997),” said Wall in an interview.

Like the Calgary event, the Edmonton dinner also saw MLAs in Alberta’s Progressive Conservative government in the crowd to hear Wall speak.

Wall said there should not be concerns about Alberta money coming into Sask. Party coffers ahead of a provincial election.

“We obviously want to welcome Alberta money to help build the economy. . . I think we should be welcoming outside investment and we welcome the support, that kind of political investment that they’re making,” he said. [Sask. Party attracts 300 to Alta. Fundraiser (StarPhoenix, May 11, 2007)]

The oil and gas industry will most certainly be looking for a return on its investment. The question is what has Wall promised them?

On September 18, 2007, the Government of Alberta publicly released the final report of an expert panel asked to examine the province’s energy royalty and tax regime.

Entitled Our Fair Share, the 104-page report provides recommendations about how the government can modify the existing provincial royalty structure.

As part of the review, the panel hosted a series of five public meetings across the province and accepted over 300 submissions from Alberta residents, municipal leaders, and stakeholders in the oil and gas industry.

“Albertans do not receive their fair share from energy development. The royalty rates and formulas have not kept pace with changes in the resource base and world energy markets. Albertans own the resource. The onus is on their government to re-balance the royalty and tax systems so that a fair share is collected,” the executive summary states.

“The total government take (Alberta and Canada, taxes and royalties) can be increased with Alberta still remaining an attractive investment destination.”

The panel made a number of recommendations including:

– Increase the total government take by 20% (about two billion dollars per year at current price and production levels.)

– No “grandfathering”. All recommended provisions should apply equally to all participants, and at the same time. Grandfathering causes market distortions and inequities among participants, which should be avoided.

– A severance tax, applicable to all oil sands projects, should be introduced.

– That the government of Alberta implement means to gather and assess the workings of all aspects of revenue policy and collection associated with energy resources in the province. This must be done on behalf of the citizens of Alberta, and its findings must be made public and have the highest degree of credibility. It must not be a confidential exercise internal to the government.

– That a truly independent, un-conflicted, world-renowned and highly experienced advisor be hired to consult widely, consider relevant international practices and then develop a permanent “bitumen valuation methodology” (BVM).

The initial reaction to the report from the usual suspects was one of disappointment.

“It’s way bigger than we thought -- it is a wholesale change to the entire royalty system,” said Greg Stringham, vice-president with the Canadian Association of Petroleum Producers.

“It’s going to be interesting what the big investors do because capital always goes where the highest return on the money is,” said Heather Douglas, president of the Calgary Chamber of Commerce.

Gary Leach, executive director of the Small Explorers and Producers Association of Canada, said the group was still trying to interpret the potential impact on companies, but was concerned about overall increase in royalties.

“This comes at a time I can tell you a majority of companies in the junior sector are reporting losses this year, and thousands of Albertans have lost their jobs in the upstream petroleum industry,” Leach said.

Jeffrey Simpson, The Globe and Mail’s national affairs columnist, said a “Family Compact” had developed between Alberta’s energy industry and its government.

“In exchange for campaign contributions and political support from the oil patch, the Conservatives offered the lowest royalty rates, supportive tax policies and enthusiastic rhetorical endorsement.”

“Even if the new proposals were adopted, Alberta’s take would still remain below that of other jurisdictions - not of Angola or Venezuela or Iran, but of good old right-wing places such as Dick Cheney’s Wyoming and George Bush’s Texas,” Simpson noted.

“It has bordered on the comical, therefore, to hear the florid rhetoric emanating from some quarters in the oil patch and its tin drummers in the local media. The report’s charts destroy these “arguments,” since the numbers illustrate that Alberta will remain more than attractive in comparison to other North American sites.” [Savaging Alberta’s bozo years and its royalty regime (The Globe and Mail, Sept. 25, 2007)]

Predictably the oil industry went on the offensive in a big way.

On Sept. 28, 2007, EnCana Corporation, the country’s largest petroleum producer, threatened to cut $1 billion from its 2008 capital investments in Alberta, or 30 to 40 percent of the $2.5 billion to $3 billion the company had planned for Alberta-based activity.

“If the Royalty Panel’s recommendations are adopted in full...We will have no choice but to slow down our Alberta-based activity and move investments to other areas in Canada and the U.S. that are more economically attractive. As a further consequence, Alberta natural gas production will continue to fall,” said Randy Eresman, EnCana’s President and Chief Executive Officer in a company news release.

The statement went on to say that, “The proposed changes will have immediate and long-term impacts on working Albertans. The magnitude of the expected capital reductions is the tip of the iceberg. In the short term, these changes would mean extensive job losses across the industry. There will be fewer wells drilled, completed, pipelined, operated and serviced. There will be fewer hotel bookings, vehicle purchases, landowner lease payments, restaurant meals and lower property taxes in the areas where EnCana operates, and that is just about every corner of Alberta, from the smallest towns to the biggest cities. More importantly and over the long term, well-paying, permanent jobs will not materialize across Alberta.”

“If MLAs in Alberta take the advice of the royalty review panel, our workers, their families and communities lose the best jobs they will ever have,” the lobby group representing Canada’s drilling and service rig sector said in a statement.

Calgary Herald city columnist Don Braid laid into the oil giant saying, “The main impression you get, reading the company’s statement, is of a terrific corporate swelled head.”

“EnCana paints an apocalyptic vision of devastation if the royalty report is implemented whole…We can imagine oil and gas executives trudging around in rags, while tumbleweeds roll past idle LRT cars converted to planters,” Braid said.

In the days that followed EnCana would be joined in the fight by CAPP, Crescent Point Energy Trust, Petro-Canada, Talisman Energy Inc. and Nexen Inc.

It was around this time that Saskatchewan was mentioned as an alternative to Alberta.

In Sask. eyes Alberta royalty debate (Leader-Post, Oct 2, 2007) James Wood reported that EnCana named Saskatchewan, along with British Columbia, Colorado, Wyoming and Texas, as potential recipients of the $1 billion in capital investment it threatened to pull from Alberta in 2008.

Some dismissed this as a bluff, but CAPP didn’t.

“You get into 2008 and that’s where I think it’s likely you will see -- if Alberta adopts the panel report -- that where’s you will see the activity shifting over to the other jurisdictions. So I think Saskatchewan will benefit from that analysis,” said CAPP vice- president David Pryce.

“The other thing too is that the other jurisdictions need to be marketing their fiscal regime and their resource opportunities to the companies and I think Saskatchewan has done that over the last few years to a relatively great success.”

Lyle Stewart, the Industry critic for the Saskatchewan Party, said the province should try to make itself even more attractive to the energy industry, pointing out that it has a provincial sales tax and resource royalty surcharge that aren’t in place in Alberta, as well as higher corporate taxes.

Saskatchewan Party Premier Brad Wall would do just that a few months later in Calgary following his party’s victory in the Nov. 2007, provincial election.

On Oct. 12, 2007, opposition parties in Alberta accused Premier Ed Stelmach of buckling to oil industry pressure not to adopt contentious proposals from the royalty report, arguing the Tory leader has sold out Albertans in the process.

According to the Calgary Herald this “came the same day the chairman of the provincial royalty panel reiterated his call for government to accept the entire report, rather than “cherrypick” from it.”

Stelmach reportedly told business leaders on Oct. 11 at a private meeting in Calgary he “will not trounce existing agreements,” according to a report in the National Post. But the premier’s comments -- which aren’t refuted by his spokesman -- contradict the royalty panel’s recommendations, which urge the province not to grandfather deals struck in past years when energy prices were a fraction of what they are today.

“If you start taking things away, it has an impact on the total government take,” panel chairman Bill Hunter said on Oct. 12, repeating the call for Stelmach to accept his entire Our Fair Share report. “That’s why we told him, even before we released the report, not to cherrypick.”

He warned that if the province allows grandfathering, it creates an uneven playing field between existing and future projects, and would significantly deny Albertans the share they deserve.

“The Conservatives have sold us out on this issue,” NDP leader Brian Mason charged.

Mason said the Tory government doesn’t have “sufficient independence” from the oilpatch to do the right thing for all Albertans, noting the provincial Progressive Conservatives collected $580,000 from oil and gas companies in 2005 and 2006. He also assailed Stelmach – who’s repeatedly promised transparency and accountability -- for meeting behind closed doors with industry executives when the public anxiously awaits the government’s decision. [Stelmach bowing to energy industry heat: opposition (Calgary Herald, Oct. 13, 2007)]

On Oct. 25, 2007, Stelmach introduced the province’s new royalty framework. The new structure, which doesn’t take effect until Jan. 1, 2009, is expected to deliver an additional $1.4 billion – 20 per cent more – in royalties in 2010, compared to current projections.

However, the province would collect about $464 million less than what the royalty review panel recommended.

Oilpatch firms declared the government’s framework the death of the winter drilling season, while opposition leaders and environmental groups said Stelmach caved under the relentless pressure from the province’s powerful oil and gas industry.

“There is genuine and very real concern,” said Pierre Alvarez, president of the Canadian Association of Petroleum Producers.

NDP Leader Brian Mason said Stelmach failed to “stand up for Albertans” by not fully adopting the royalty report.

“We think Ed Stelmach blinked,” Mason said.

Officials with the Pembina Institute, an Alberta environmental think-tank, expressed similar disappointment.

The question in Saskatchewan is how much influence will the oil and gas industry have on the new Brad Wall government? If the right-wing Saskatchewan Party’s first two months in office are any indication it appears the answer to that is considerable.

Just when Alberta seems to be waking to the fact that it’s the people of the province that own the resources and is moving to ensure they are receiving their fair share from energy resource development, Saskatchewan appears determined to move in the other direction and give oil companies whatever they want.

On Nov. 9, 2007, two days after the provincial election, Premier-designate Brad Wall said that the new government is considering a review of oil and gas royalties. But Wall is thinking about lowering, not raising, royalty rates, as his counterpart in Alberta, Premier Ed Stelmach, has done.

In Avoiding a royalty pain (Leader-Post, Nov. 17, 2007) Bruce Johnstone, the Leader-Post’s financial editor, said Wall has stated several times that reviewing oil and gas royalties will be one of the first jobs of EnterpriseSaskatchewan, his economic development uber-agency.

“Let’s make sure our royalties and our regulatory regime make us competitive, not just with conventional oil and gas, but non-conventional oil and gas (in Alberta),” Wall said during the election campaign. “And that’s a review we’d want to conduct immediately through EnterpriseSaskatchewan.”

That’s the message Wall would soon take to Calgary.

A Jan. 17, 2008, government news release announced that Premier Brad Wall and Energy and Resources Minister Bill Boyd would be in Calgary the following week to speak to investment audiences and oil and gas industry leaders about energy and investment opportunities in Saskatchewan.

“Wall will address a sold-out luncheon meeting of the CFA Society of Calgary (Chartered Financial Analysts) on Monday, January 21 and speak at a Saskatchewan government hosted reception for oil and gas industry leaders the evening of Tuesday, January 22. The premier and Boyd will also hold individual meetings with various energy companies and industry associations during the two-day trip,” the news release states.

The very next day Wall promptly torpedoed the credibility of his government’s EnterpriseSaskatchewan scheme before it even gets started saying Saskatchewan had no plans to hike royalty rates.

The Saskatchewan Party government is “simply not interested” in increasing royalties, Wall said. However, the new economic development agency being formed…may want to look at the royalty structures in place, Wall said.

Wall’s deference to the interests of the oil and gas industry couldn’t have been clearer. In his speech to the Calgary Petroleum Club on Jan. 21 Wall offered more of the same saying:

“The new government in the province of Saskatchewan will not be increasing royalties in the province of Saskatchewan.

We have said that we want a review, and I wish there was another word, but that’s the best one.

We want to review both the royalty and the regulatory structures we have in place, not just by the way in oil and gas, but in regard to potash and other resources that we’re looking at.

We want EnterpriseSaskatchewan’s sector team, which will involve industry by the way, to do this review for the purposes of trying to be more competitive.

We need to move in that other direction and here’s why: we have all this undeveloped potential. We’re behind a little bit, frankly, in developing the hydrocarbon assets of the province of Saskatchewan and some of the other resource opportunities that exist.

So, we’ve got to have a sharper pencil. We’ve got to make sure we are turning around permits. We’ve got to make sure that our regulatory structure is as conducive to non-conventional assets like shale gas and shale oil as it might be to more conventional assets. That will be our focus.

That will be the direction that we give to EnterpriseSaskatchewan.”

As if that weren’t enough the Wall government then gave the Calgary-based oil and gas industry lobby group the Canadian Association of Petroleum Producers (CAPP) the final word on the Premier’s two day junket to Alberta in a Jan. 23, 2008, government news release.

CAPP President Pierre Alvarez called meetings with Saskatchewan officials “informative and constructive.”

“We were pleased Premier Wall and Minister Boyd were able to meet with us so early in their new mandate,” Alvarez said. “It’s clear that the Government of Saskatchewan is interested in the long-term growth and stability of the oil and gas industry in the province.”

In other words the oil and gas industry has Saskatchewan right where the want it – in their pocket.

The following are those companies within the energy industry that contributed to the Saskatchewan Party from 2003–2006: